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Net Neutrality: What's The Real Threat?

And it’s even more limited than that, because it’s only an enhanced delivery service that is differentiating traffic on the broadband provider’s network. The FCC has said that this doesn’t address what’s called “peering,” which is how the traffic actually comes into the network over the Internet. So, you’re absolutely right — there are some very serious and reasonable concerns that people have expressed. The fact is, though, we haven’t actually seen the FCC proposal. What chairman Wheeler has suggested — in a blog post — is that there are going to be some substantial restrictions on how those paid prioritization arrangements can be adopted. I think, absolutely, if there’s too much room for the broadband providers to degrade the basic Internet pipe, that will violate the spirit and the reality of network neutrality. But my take is that’s not necessarily going to be the case if there are sufficient conditions put into place.

Knowledge@Wharton: So, why the misunderstanding? Why is this proposal — which will then have months of comment and debate — seen as such a threat by so many people?

Werbach: It’s a [sign] of just how partisan things have gotten in Washington. The reason that this is at the FCC is that Congress has refused to act. In fact, whenever the FCC has tried to act, different factions in Congress have threatened basically to grind the FCC to a standstill if it doesn’t do what those members of Congress want. It’s a very difficult and charged situation.

Again, the FCC has tried two times before and has proposed rules that generally haven’t provided what network neutrality advocates really wanted, which is what’s [referred to as] “reclassification.” They have been advocating that the FCC change the regulatory category that broadband is under in the U.S., [instead placing it] in the category called Title II, which applies to telephone service.

What people miss is that under Title II, under that telephone regulation category, you can do paid prioritization if it’s offered on the same terms to everyone. But there’s a perception that that’s the only solution that will protect network neutrality. And the fact that the FCC has now said, “We’re not going to do that, and we’re going to step back somewhat from what the previous FCC rules had said before they were overturned” — I think that’s gotten a lot of the network neutrality advocates upset because they see that President Obama and other officials have long claimed that they support an open Internet.

Knowledge@Wharton: And yet, when they see that there is going to be, again, two prices, two speeds, they see it as … the camel’s nose edging under the tent. What you’re saying is, we don’t really know that for sure but that the concern seems a bit overblown at the moment?

Werbach: Yes, it’s always unsatisfying when someone who is an academic or a policy wonk says, “It’s complicated.” But, it’s complicated, because it’s complicated in several ways. Technically it’s very complicated. What exactly these prioritization deals are, how they work, the engineering, how they compare to all the other options that those companies have is a very complex subject. It’s not that there’s just one way you get from here to there on the Internet. A company like Netflix has a whole variety of different providers it uses. It uses caching systems called “content delivery networks.” It engineers where its traffic goes. And it’s paying for all those services. So, it’s not that there’s this free Internet pipe and now for the first time there’s a paid pipe. There’s a lot more complexity on that side.

And then on the FCC side, there’s a lot of complexity. Again, what are the practices that go into effect? How does the FCC respond? What are the enforcement practices? And again, that’s always going to be the issue. Even if the FCC adopted this Title II regulation, they would still have to make distinctions and still have to engage in enforcement.

Knowledge@Wharton: What do you think is the bottom line for people who are looking at this issue from the outside? They see this might be a threat to network neutrality. The issues are complicated. What does it mean, for example, for consumers? Will it affect what they’re paying?

Werbach: Two points. One is that network neutrality is this vague concept. It’s a buzzword. It’s a slogan. But we need to walk back and break down what it actually means. What should people be concerned about? People should be concerned, on the one hand, if new innovative services can’t get off the ground, and can’t reach their customers — or you see that their service is being degraded…. And if we have evidence of that, then that’s something that should be taken to the FCC and to Congress and so forth to say this isn’t working.

Secondly, people should be concerned on the end-user side. If they find, for example, that broadband providers are creating discriminatory caps, saying, “You get 50 megabit service but you have this limit on your bandwidth and only certain services are subject to the limits. Ours aren’t. And the limits are far more restrictive than what’s necessary for network management.” Then that’s something. And frankly, those conditions aren’t covered under network neutrality. But they’re the kinds of things that might create these harms, that people are worried about….

The big thing that people should think about, the reason this is such a concern, is that we don’t have enough competition for broadband in the United States. We do have multiple providers in many places, but typically [there are] very few. And in much of the U.S. there aren’t multiple providers for truly high speed service. So … the FCC and Congress need to do everything possible to promote more competition. And frankly, the FCC and Chairman Wheeler have a lot of that on the agenda. The question is, can the FCC get to that agenda or is network neutrality going to be such a controversy that that’s the only thing the FCC focuses on for the rest of the Obama Administration?

Knowledge@Wharton: How could we get more providers and increase that competition level?

Werbach: The U.S. made a choice — and I think, frankly, a wrong choice — about 10 or 15 years ago, which is different than just about every other country in the world. I did a bench-marking study on fixed broadband for the OECD [Organisation for Economic Co-operation and Development], which is about 40 countries around the world. And the U.S. was one of the only ones that didn’t require what’s called “open access,” that didn’t require the high speed broadband providers to share their networks. So, we didn’t go down that path and at this point politically it’s very unlikely we will.

We need to think about alternate physical platforms. One of them is municipalities, cities or organizations going in and getting access to city capacity, polls and conduits and so forth in municipalities to provide their own broadband network. It’s a huge source of broadband competition in certain parts of the world, especially Scandinavia. Here in the U.S., we have laws that prohibit that in many states and cities.

The second one, the big one, is wireless. Right now wireless service isn’t a one-to-one competitor for high speed broadband. But as technology advances, in particular for what’s called “unlicensed share access to wireless” there is the potential, at least for a chunk of the broadband market — that wireless could provide a viable competitor.

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